AGS NEWS – The Central Bank of Nigeria (CBN) has issued a reminder to banks in the country, emphasizing that they cannot use their foreign exchange revaluation gains to pay dividends or cover operational expenses.

This caution came through a circular released on Thursday, signed by Adetona Adedeji, the acting Director of the Banking Supervision Department at the CBN.

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The directive reiterates a previous communication from September 1, 2023, urging banks to exercise caution and reserve foreign currency (FCY) revaluation gains as a precautionary measure against adverse movements in the foreign exchange (FX) rate.

According to the CBN, banks are instructed not to allocate these gains for dividend distribution or operational costs.

This move by the CBN follows a prior directive issued in September, which instructed Deposit Money Banks to refrain from utilizing gains from foreign exchange revaluation for dividends and operational expenses.

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The circular from September 11, 2023, signed by the then Director of the Banking Division Department, Haruna Mustafa, mandated immediate compliance with the new directive.

Foreign exchange revaluation gains occur when the value of a bank’s assets and liabilities denominated in foreign currency increases due to fluctuations in the exchange rate between the foreign currency and the local currency.